Employer Liability

Today TaxMama hears from Larry in CT, who asks. “Suppose an employer hires an undocumented worker who presents a valid ITIN (Individual Taxpayer Identification Number). The employer withholds & reports payroll taxes for that worker using this ITIN. The Social Security Administration issues a “no match” letter to the employer containing all sorts of implicit threats because an ITIN is not recognized as a SSN. Does the employer have any potential liability for withholding and reporting with a (legal) ITIN instead of a SSN? (I understand that IRS will not reveal ITIN filers to Immigration authorities, so I am not concerned about immigration law enforcement as a result of the no match.)”

How interesting, Larry. Is that what’s coming from SSA when you file W-2s for an employee with an ITIN?

I don’t know about your legal liability with respect to SSA or any other law enforcement agencies. You’d have to read that letter from the Social Security Administration and see what they are threatening. And then assess your risks and problems.

I do know the law when it comes to IRS.

When it comes to being an employer and having an employee on payroll – whatever ID number that employee provides, as far as the Internal Revenue Code, Code Section 3402 holds employers responsible for collecting the proper withholding taxes at the source.

An employer who doesn’t do that could become liable to IRS for the employee’s federal withholding and FICA/Medicare taxes.

So, what do you do now?

Naturally, ideally, the best solution is to be careful not to hire workers who do not have work permits in the USA. One way to ensure that is to be sure to have all employees fill out form I-9 and to copy the documentation they provide that is their proof of identity and/or the right to work in the USA. https://uscis.gov/graphics/formsfee/forms/i-9.htm

Once you’ve already hired them, if you don’t want to fire them, perhaps you can help them get work permits. Then maybe the SSA threats will stop?

Remember, you’ll find answers to questions about employer taxes and all kinds of tax issues, free. Where? Where else? At TaxMama.com

[Note: If you were subscribed to the e-mailed TaxQuips, you’d get special tips that aren’t published anywhere else. Please click on the subscribe link and join us.]

File Download (2:18 min / 0.5 MB)